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Explanations for the Top Ten Tips to Prepare for an Efficient Audit - Have Readily Available

Plan and Trust Document, Adoption Agreements, Amendments, Summary Plan Description and Summaries of Material Modification (This may require providing some or all of the  prior versions of the foregoing documents)

An audit review verifies that your plan document contains all terms and provisions necessary to satisfy requirements for tax qualification and that all required amendments have been timely and properly adopted. This will require a review of the complete executed version of your plan document, including amendments, as well as your plan’s trust documents (which may be included in or separate from the plan document itself) that were in effect during the plan year under audit. The Internal Revenue Service (“IRS”) may also require a review and verification that prior versions of your documents were timely and properly adopted. This review may also require you to furnish all amendments, if any, signed after the plan year under audit. An agent will advise you as to the documents that may be needed and why they are needed.

Many plans operate pursuant to either a prototype or a volume submitter document.  Prototype plans and some volume submitter plans consist of both an adoption agreement and a separate basic plan document. The adoption agreement reflects specific choices made by you for your plan, including eligibility requirements, the types and amounts of contributions allowed, the allocation method for employer contributions, the vesting schedule applicable to employer contributions, and the distribution options. The adoption agreement is not the complete plan document and must be accompanied by a basic plan document, which provides in-depth details of how the plan should operate. The summary plan description is a separate document you provide to your employees that explains key features of your plan, along with other information required under ERISA. All of these documents are equally important in showing key provisions of the plan and how it should operate.

An agent may ask that some or all of these documents be provided prior to the initial audit appointment. This will allow the agent time to become familiar with your plan before the appointment and to request clarifying information if needed. It will also reduce the amount of time the agent will need to spend at the audit site and provide you or your representative with an opportunity to respond to any questions that may be raised as a result of the initial review of the plan documents.

Opinion Letters / Determination Letters

The IRS issues opinion letters to providers of prototype and volume submitter plan documents. Though you are not required to obtain one, the IRS may issue a determination letter for your specific plan if you request one by filing an Application for Determination (generally through filing a form in the IRS Forms 5300 series). These letters advise you that your plan documents comply with current law.

Requested Records Efficiently Organized

It is important that all records are present, available, and separately identifiable at the audit location in advance of the audit. The requested information should be organized in a manner that will allow for quick and easy review. You should not wait for the agent to arrive to begin locating or pulling records that have been requested unless mutually agreed between the agent and you or your representative. It is also helpful to have the records labeled or tabbed to coincide with the Information Document Request (IDR) attached to the appointment letter. Having records pulled and organized will help to ensure the audit process is more efficient and may lessen the time an agent will need to spend either at the audit location or in any required follow up appointments.

Copying of any documents is not needed unless specifically requested by the agent either prior to or during the audit.

Agreements With Service Providers

If you have outside service providers performing administration of your plan or trust please have available any agreements or other documentation that explains what services or aspects of the plan or trust administration they provide. Such services or administration may include preparation of Form 5500, determining who should/should not be in the plan, nondiscrimination testing, vesting, allocation of contributions, selection and/or management of investments of plan assets, maintenance of plan documents, actuarial services or other administrative or fiduciary duties.

Page Last Reviewed or Updated: 09-Jan-2017